Foreclosures on Island Outpace Most of State

By: C.J. HUGHES | NY Times

If Dawn Mercedes had studied the application with her mortgage broker closely, she might have noticed fine print that she said she later realized overstated her ability to pay.

But Ms. Mercedes, a new mother and recent newlywed eager to own her first home, a four-bedroom ranch in Mastic, said she “didn’t even read it.” With $5,000 down, Ms. Mercedes, 43, who works in the deli section at Best Yet Market in Riverhead, bought the house for $350,000 in 2005.

“I was told, ‘Oh, you’re approved for $360,000,’ and that was that,” she said.

That mortgage would come back to haunt her. A few months later, her husband, Ramon Mercedes, who is from the Dominican Republic, was detained in New Jersey in a dispute over his immigration status.

Without his salary, Ms. Mercedes quickly fell behind on her $2,700-a-month payments, and GreenPoint Mortgage, her chief lender, refused a plan for partial payments, she said.

Foreclosure proceedings were begun, but a spokeswoman for Countrywide Financial, which currently holds some of GreenPoint’s mortgages, said it is working with Ms. Mercedes to modify the terms of her loan and prevent her from losing the house.

Ms. Mercedes’s predicament is hardly unique on Long Island, where for more than a year homeowners have faced higher foreclosure rates than much of the rest of New York.

Suffolk was fourth among the state’s 62 counties last year with 5,855 foreclosure filings recorded, behind only Orange, Richmond (Staten Island) and Putnam Counties, according to RealtyTrac, a national research service. Though the Suffolk total was down slightly from 2007, when there were 6,024 filings, foreclosures still affect 1 of every 100 Suffolk homes.

Nassau was 10th among the state’s counties, with 4,099 foreclosure filings in 2008 — a 13 percent jump from 2007, when there were 3,635, the data shows.

Many advocates who focus on housing issues say that Long Island’s foreclosure woes will not end soon.

Low introductory rates on loans taken out a few years ago will continue to reset higher in coming months to levels that are beyond many homeowners’ reach, the advocates say. Many of those loans are subprime mortgages to lower-income individuals, concentrated in places like Baldwin, Merrick and Hempstead in Nassau and Wyandanch, Huntington Station and Brentwood in Suffolk, they said.

Meanwhile, Long Island home values are dropping, so dwellings are often worth less than their loan amounts, which could be a disincentive to keep pace with payments. Prices of single-family homes on Long Island, excluding the Hamptons, shed 10 percent of their value in a year, according to Prudential Douglas Elliman’s fourth-quarter 2008 report.

Foreclosures may also be a function of the rental shortage on the Island, said Peter Elkowitz, president and chief executive of the Long Island Housing Partnership, a nonprofit agency in Hauppauge. (Rentals make up 20 percent of the Island’s housing stock, according to the 2000 census, while in Westchester rentals constitute 40 percent.) Faced with few inexpensive rentals, some Long Islanders took chances with risky mortgages.

Some foreclosed homeowners have left the Island or moved in with relatives or into illegal apartments, Mr. Elkowitz said. Others have turned to his group for help negotiating better loan terms so they can stay put.

His office has gained 375 new clients a month since the fall’s bank collapses, Mr. Elkowitz said, compared with 400 in all of 2006. Twenty percent modify their loans, he said, and about half the clients end up holding onto their homes longer than they might have otherwise.

Other groups are tackling the problem with a more policy-oriented approach, like the Association of Community Organizations for Reform Now, known as Acorn. It wants New York to impose a one-year foreclosure moratorium, which lawmakers proposed last year but ultimately dropped.

To further that goal, Acorn staged a demonstration on Jan. 13 in Mineola at the weekly auction of foreclosed properties at Nassau County Supreme Court, when 130 homes were scheduled for sale.

Inside a ground-floor courtroom, demonstrators stood up, after a clerk announced each lot, and shouted: “I bid zero. The house should be returned to its rightful owners.”

After being cleared from the room by court officers, the 25 demonstrators regrouped outside, chanting, “No more auctions.”

Diane Goins, the chairwoman of Acorn’s Nassau foreclosure committee and the leader of the demonstration, said: “We need real solutions. We need action.”

Gov. David A. Paterson continues to resist the idea of a moratorium, as it could delay owners’ problems till a time “when they could grow to become more significant,” a spokeswoman, Erin Duggan, said in an e-mail message.

“Moreover, a moratorium could severely and negatively impact on our already fragile credit markets and raise constitutional concerns,” Ms. Duggan wrote.

A state bill passed in August, which effectively stretches the grace period on defaulted home loans to six months from three, is a better solution, she said.